Things to Consider When Creating a Trust

In the past, trusts were used almost exclusively by wealthy families to guard and pass down family wealth from one generation to the next. Over time, however, trusts have become much more useful to the average person. If you are thinking of adding a Trust to your your estate plan, you need to consider the terms very carefully.   To get you started, the Oklahoma City trust attorneys at Parman & Easterday discuss some of the things you may wish to consider when creating a trust.

Trust Basics

A trust is a fiduciary arrangement that allows a third party, referred to as a Trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts must specify how and when assets pass to the beneficiaries.  All trusts can be divided into two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are activated by a provision in the Settlor’s Last Will and Testament and do not become active during the lifetime of the Settlor. Conversely, a living trust is activated during the Settlor’s lifetime. Living trusts can be divided into revocable and irrevocable living trusts. The type of trust you incorporate into your estate plan will depend on your estate planning goal(s).

Things to Consider

The terms of your trust are used by the Trustee to administer your trust. These terms may be the only guidance the Trustee has to  discern your intentions during the administration of the trust. While you should always consult with your estate planning attorney when creating your trust, as the Settlor you will  decide what trust terms to include. Some things to consider when creating your trust include:

• Be clear and concise. A predominant reasons for using a trust to distribute assets is that it avoids probate.  This means there is no need for judicial oversight. If the trust terms are vague, it may be necessary for a court to interpret them – which is what you were trying to avoid in the first place.
• Include a trust purpose. The purpose of the trust may be clear and obvious to you, but you are not the person who must administer the trust once you are gone or the judge who may need to interpret the trust later. Take the time to include a clearly stated purpose for your trust.
• Remember future beneficiaries. It is easy to focus on current beneficiaries and forget future beneficiaries, if there are any.  Whether your trust has an entire class of future beneficiaries, as with a charitable trust, or your trust includes beneficiaries who have yet to be born, make sure you take them into consideration when creating your trust.
• Anticipate the need for alternatives. Life can be  unpredictable. The administration of your trust may be just as unpredictable, so consider the need for alternatives within the trust agreement. The most important is naming a successor Trustee if your original Trustee cannot or will not serve.  Failing to plan for a successor Trustee is a common reason trust agreements wind up in court.
• Provide identification when possible. Ambiguous beneficiaries or assets are a nightmare for a Trustee. Instead of saying “my son,” provide his full name, date of birth, and current address. The same applies to assets referred to within the trust.
• Consider the need for discretion. Although it is not always wise to give a Trustee too much discretion, when a Trustee has some discretion he or she can resolve any number of potential problems without the need to involve a court.

Contact Oklahoma City Trust Attorneys

For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about creating a trust, contact the experienced Oklahoma City trust attorneys at Parman & Easterday by calling 405-843-6100 to schedule your appointment today.